AKAM Stock: This Is Why You Should Be Bullish on Akamai Technologies, Inc.

By Alessandro Bruno, BA, MA Published : February 11, 2016

Akamai Technologies, Inc. (NASDAQ:AKAM) stock soared 21% on Wednesday. The Akamai stock price shot from $39.57 to $47.80 overnight. Its shares are now heading toward the stock’s year-to-date high of $52.63. Yet Akamai stock has shown that it can plunge just as easily as it can rise. Last October, AKAM dropped from $75.55 to $60.82.

The buyback distracts investors from the fact that Akamai has lost two important customers: Apple Inc. and Microsoft Corporation. For years, these two Silicon Valley pillars were Akamai’s best customers. Akamai is still one of the world’s top Internet and cloud content management providers, but things are about to change—and it won’t be in Akamai’s favor.

Akamai CEO Tom Leighton, warned shareholders that the company has started to notice a cut in revenue from Apple and Microsoft. This appears to be more than just a temporary phenomenon. Leighton said recently that 13% of Akamai’s revenue came from Apple and Microsoft. For 2016, these two clients will account for only six percent of revenue, as reported by AppleInsider. (Source: “Apple’s in-house CDN efforts spell trouble for Akamai as infrastructure biz warns of losses,” AppleInsider, February 10, 2016.)

For years, Apple has been investing heavily in data center and Internet backbone connections. The Cupertino-based company already owns some of the largest and most advanced data centers in the world. Plus, it has more on the way. Apple uses Akamai structures to support its “iTunes” traffic. The ever-evolving nature of Apple cloud services, such as “Apple Music,” may have changed its requirements.

Competition Is Growing for Akamai

Add to that bad news that Akamai also faces tougher competition from Amazon.com, Inc. The retail specialist is branching into information security and cloud computing. Its intensity is terrifying competitors such as Akamai.

As for Microsoft, it, too, is building its cloud potential. Microsoft’s “Azure” public cloud product offers a native active directory (NAD) integration feature. However, Amazon is more cunning. Its technology allows for a smooth migration of Microsoft tools to the Amazon platform with minimal disruption.

Out of 19 analysts covering Akamai stock, most are favorable (52%). Thirteen analysts rate it a “Buy” and some have a target price of $85.00 per share, which implies a doubling of the company’s current value.